India has long tried to erode China’s status at the heart of global value chains, with mixed results. Then Covid-19 hit, unveiling an extreme dependence on China and giving companies compelling reasons to move out of the country — or at least diversify their production matrix. 

“Covid-19 has had implications on global and regional supply chains,” Arvind Subramanian, the chief executive of Mahindra Lifespaces, the property development arm of the Indian conglomerate, tells fDi. “We are already getting enquiries from companies in China thinking of facilities outside the country.” 

Make in India

Over the past two decades, Indian governments have repeatedly tried to foster a renaissance of the country’s manufacturing industry, and the current prime minister Narendra Modi is no exception. Mr Modi launched initiatives like Make in India, aimed at promoting the country as a manufacturing hub for the fast-growing domestic market, but also for exports bound to the regional and global markets. 

Results have been mixed, however. As highlighted by a report by consultancy McKinsey, manufacturing generated 17.4% of India’s GDP in fiscal year 2020, little more than the 15.3% it generated in 2000. By comparison, Vietnam’s manufacturing sector more than doubled its share of GDP during the same interval, according to McKinsey’s analysts. 

Notwithstanding its potential, India remains a land of challenges. Despite great improvement in the past years, India still lags far behind China for ease of doing business, according to the World Bank. 

Plug-and-play

Companies like Mahindra Lifespace Developers are turning that challenge into an opportunity. 

“Our plug-and-play infrastructure is a big draw for any company that chooses to stay with us,” Mr Subramanian says. 

The company launched its first Mahindra World City in Chennai in 2002 — a township integrating residential, commercial and industrial offers in one masterplant. It doubled down a few years later with World City Jaipur.

More recently, the company bet on a smaller, industrial-specific format, ‘Origins’, which it unveiled in 2017. Since then, two Origins parks have opened doors in Chennai and Ahmedabad. The company is now acquiring land in Maharashtra for a third industrial park to launch in two years’ time while also scoping locations for another two parks down the line, Mr Subramanian confirms. 

While it takes two to three years for investors to acquire the land for a new site and clear all the bureaucratic hurdles to start constructions and, eventually, operations, Mr Subramanian claims his his company “guarantees speed to market” bringing down the initial set-up to nine or 10 months. 

On the move

The company has been fielding calls from Taiwanese and Japanese prospective clients as Covid-19 exposed existing fragilities in global value chains that heavily rely on Chinese manufacturing, Mr Subramanian says. 

“[The pandemic] opened up further opportunities for investment in our World Cities and Origins industrial parks as investors are looking at expanding their local footprint and having a second facility outside China.” 

The Indian government has been proactively approaching companies considering a shift out of China; the country’s minister for IT and Communications, Ravi Shankar Prasad, said that Apple shifted nine of its 11 iPhone manufacturing units out of China into India, according to local press reports on November 26. 

Companies are on the move. Indian developers of the likes of Mahindra Lifespaces are also on the move to make the most of this titanic shift sparked by Covid-19. 

This article first appeared in the December/January print edition of fDi Intelligence.